How moderate are the moderate monthly rent and moderate sale price?

I – Portugal Is Not Lisbon

In response to statements that “€2,100, €2,200 or €2,300 are not moderate rent levels,” the Government’s answer has almost always been: “Forgive us, but in Lisbon they are.”

Even conceding that €2,300 may be a reasonable upper limit for a moderate rent in Lisbon, how is it possible for that same amount to be applied across the entire country?

Is the Government unaware that — according to Statistics Portugal’s (INE) Local Housing Rent Statistics (referring to the first quarter of 2025 and published on 27 June of the same year, the most recent report available at the time of writing) — the median rent in Lisbon for new lease contracts stands at €16/m²?
And that in Braga and Coimbra — two of the most relevant cities nationwide — the median stands at €7.45/m² and €8.67/m², roughly half of Lisbon’s level?

According to Idealista, at the time of publication, fewer than 5% of apartments listed for rent in Braga are advertised at €2,000 or more.
In the municipality of Coimbra, again according to Idealista, there are only four listings (out of roughly 300 properties) at €2,000 or above.

There is no reasonable basis to justify applying a tax reduction to the construction of housing intended for rent that are unequivocally high in the contexts of Braga, Coimbra, and many other district capitals and mid-sized cities.

Applying the same benchmark to all 308 municipalities is equally inappropriate when defining €660,982 as a “moderate sale price” nationwide.

Economic agents respond to incentives. It is plausible to expect that, across much of the territory, part of the supply will tend to move — insofar as local conditions allow — toward that maximum threshold.

To gain a more objective understanding of these discrepancies, consider the Local Housing Price Statistics published by INE (referring to the third quarter of 2025 and published on 2 February 2026, the latest report available at the time of writing). The median price per square meter in Lisbon — with the exception of Porto and Faro — is roughly double or triple that of other coastal district capitals.

When looking at inland district capitals, Lisbon’s values can reach four or five times those of those cities.

The numbers are clear: in Lisbon, the median stands at €4,691/m².
In Viana do Castelo and Setúbal, it is €1,698/m² and €2,320/m², respectively.
In Guarda and Portalegre, the figures are €973/m² and €1,000/m².

On the Idealista portal, at the time of publication, it is possible to verify that:

In Marinha Grande and Pombal — two municipalities in the district of Leiria — the most expensive apartments listed for sale are advertised at €399,000 and €420,000, respectively.

The most expensive apartment in Castelo Branco is listed at €335,000. It is new construction, and the word “luxury” appears four times in the property description.

The most expensive apartment available in the municipality of Bragança is listed at €325,000, and it is the only one above €300,000.

I could provide another 250 examples of municipalities where it makes little sense for the State to incentivize construction up to the maximum ceiling of €660,982.
 

Most likely, the outcome of this political decision will be the application of tax benefits to mid-to-upper segment new developments in Guimarães, Aveiro, Santarém, or Palmela — at the “moderate” values of Lisbon and Cascais.

For every developer, volume of investment and parcel of land allocated to projects involving €500,000 or €600,000 homes, there is one less company, one less tranche of capital, and one less piece of land dedicated to building apartments priced between €200,000 and €400,000.

Either the Government calibrates the criteria for granting the tax reduction, or it will end up diverting the incentive away from the construction of housing at prices accessible to the middle class, toward the production of prime-segment homes — a segment to which the market already responds organically without significant need for additional stimulus.

Consider the example of Vizta, which — through its Core brand — found solutions to offer a 31 m² studio (T0) for under €100,000 or 98 m² three-bedroom apartments (T3) for just over €300,000.

This residential development is being built in Leça da Palmeira, within the municipality of Matosinhos, the second most expensive municipality in the Porto Metropolitan Area.

The objective of this draft law should be to stimulate initiatives that generate housing in price segments similar to this project.
 

In its current wording, the draft law risks offering those who called for greater decentralization the one thing they do not want from Lisbon — its housing costs.

II – Why is the cap on rent (or price) the same for a studio (T0), a two-bedroom (T2), or a four-bedroom (T4)?

Even in parishes such as Campo de Ourique, Estrela, or Parque das Nações — where residential values are higher than in most of Lisbon’s 24 parishes — it is not true, for example, that €2,000 constitutes a moderate rent for a one-bedroom apartment (T1) with an area between 60 m² and 80 m².
The same applies to Foz or Porto’s historic center.

According to the Idealista portal, at the time of publication, there are more than 1,400 T1 apartments listed for rent in the municipality of Lisbon, fewer than 300 of which are advertised at €2,000 or above. What sense does it make to support landlords whose properties sit in the fourth quartile of the price distribution?

In Porto — again according to Idealista and at the time of publication — we would already be speaking of the 98th or 99th percentile.
The mismatch is not merely evident; it borders on the absurd. And it extends to sale prices as well.

Still, the budgetary cost of supporting rents that are not truly moderate concerns me far less than the tax incentive granted to the production of mid-to-upper segment housing. In that case, fiscal effort is diverted away from what the country most needs — housing accessible to the majority — toward a segment that the market already produces organically, without incentives.

In the case of sales, one might accept that €660,982 constitutes a moderate price for a T3 or T4 in Lisbon. But it is difficult to accept that the same could be said of a one-bedroom apartment.

If today I can find a development in central Lisbon, near Praça do Chile and the Metro, advertising 80 m² two-bedroom apartments (T2) with two bathrooms (one en suite), a 6 m² balcony and a parking space for €570,000 and €580,000, why should the State stimulate — via tax benefit — the production of studios or one-bedroom units at €600,000 or €650,000?

What prevents a real estate developer from maximizing the number of units eligible below the €660,982 threshold (thereby securing the tax benefit), opting for smaller typologies while charging significantly higher prices per square meter?

A developer might even argue before local authorities that the 2021 Census shows that, compared to 2011, the number of one- and two-person households has increased, while households with three, four, and five members have decreased. And that, overall, the average household size has been declining, while the number of adults living alone has been rising.
In all likelihood, that would be my professional advice.

Private initiative is fully legitimate in seeking to maximize the economic rationality of a project.
But it is the State’s role to prevent benefit-maximization strategies that divert the incentive away from the sphere of public interest.

It should be evident to everyone that within the same building, what may constitute a moderate price (sale or rent) for a three-bedroom apartment will, predictably, be exorbitant for a one-bedroom apartment.
If the Government intends to ignore this evidence, it should explain how such a choice benefits the middle class.

An 80 m² one-bedroom apartment sold for €600,000 corresponds to €7,500 per square meter. The latest median value recorded for Lisbon is €4,691 per square meter.

In other words, under the wording of Draft Law no. 47/XVII/1.ª, a property with a price per square meter exceeding the median value recorded in Lisbon by more than 50% may still be classified as a “moderate sale price.”

And, as we have already seen, it may be classified as a “moderate sale price” not only in Lisbon, but also in Vila Real, Oliveira de Azeméis, or Mértola.
 

If the previous example clearly corresponds to an expensive property, how can we accept a legislative solution that — with all the implications discussed — classifies its price as “moderate”?

A public policy that fails to acknowledge this reality risks losing its legitimacy.

III – Are We Going to Reduce Taxation on One-Year Lease Contracts?

Does it make sense to grant a tax discount to landlords who enter into one-year contracts that do not provide for renewal?
Landlords are fully within their rights to do so. But I question whether it makes sense to grant a tax benefit to those who offer no stability to the tenant.

Current legislation provides for the possibility of a 10-percentage-point reduction (from 25% to 15%) in IRS taxation for landlords willing to sign a five-year contract.
Are we now going to grant a 15-percentage-point reduction (from 25% to 10%) for contracts lasting only one year?
If family stability remains an objective, this tax design appears counterproductive.

Moreover, much has been said about encouraging built-to-rent (construction specifically for rental purposes). Institutional investors traditionally associated with this model favor longer-term contracts for reasons of cash flow predictability, risk reduction, and operational efficiency.


Considering that, regardless of the initial term, a landlord’s room for maneuver during the first three years of a renewable contract is already constrained by paragraph 1 of Article 1096 (Automatic Renewal) and paragraph 3 of Article 1097 (Landlord’s Opposition to Renewal) of the Civil Code, a three-year solution seems to be a reasonable compromise between the need to provide stability to tenants and the Government’s objective: broadening the number of contracts eligible for the tax reduction in order to motivate more owners to place their properties on the rental market. Indeed, this is what the same draft law already provides for under the simplified affordable rental regime.

If it is argued that such a solution would disadvantage tenants seeking only short-term contracts, it is important to recall that paragraph 3 of Article 1098 (Tenant’s Opposition to Renewal or Termination) allows tenants to terminate the contract after one-third of the initial term has elapsed, subject to 120 days’ notice — a prerogative not granted to the landlord.


If stability in residential leasing is a priority, the granting of tax incentives should be conditional upon guaranteeing it.

Conclusion

Recent years have been marked by successive increases in housing prices and by a widening gap between Portuguese household incomes and the cost of housing.
The draft law under consideration correctly identifies one of the constraints on access to housing: insufficient supply.

The use of tax incentives as a public policy instrument is, in this context, a legitimate and potentially effective option. It is also worth noting the broad fiscal scope of this legislative initiative: it represents a coordinated approach involving IRS, IRC, VAT, IMI and IMT, with the objective of making more housing available at moderate cost.

That said, some researchers argue that the outcome of reducing VAT on construction may not be a fall in house prices, but rather an increase in developers’ margins or in land prices.

One thing is certain: the effectiveness of any tax incentive depends on the precision of its design.
At present, the Government is classifying as “moderate” prices that are objectively high for most of the national territory. If nothing is amended in Parliament, a reinforcement of supply in the mid-to-upper segment of the market is foreseeable.

There is absolutely nothing wrong with that housing segment. But increasing its supply will not enable the bulk of the middle class to rent or purchase a home suited to their needs. For that reason, it is not the segment to which a tax benefit should be directed.

The Government cannot — and the expression is deliberate: cannot — claim that it seeks to promote the creation of housing units at prices affordable to Portuguese households while simultaneously deciding to grant tax benefits supporting the development of housing across the country at price levels that — as market data unequivocally demonstrate — correspond to expensive properties in most of the national territory.

The failure to differentiate value ceilings by typology is also difficult to justify.
It is one thing not to overburden real estate development; it is another to assume that the economic agent’s rationality, absent limits or reference criteria, will not undermine the Government’s purpose.
Because that is precisely what will happen. I have no doubt that the absence of clear criteria will encourage the construction of 60 m² one-bedroom apartments at the “moderate” price levels appropriate to 120 m² three-bedroom units.

Finally, granting the same tax treatment to one-year and five-year lease contracts removes the incentive for landlords to prioritize longer terms.
In doing so, it disregards the importance of stability in residential leasing — something that should be a priority in any public housing policy.

For this reason, the detailed parliamentary discussion of Draft Law no. 47/XVII/1.ª represents a decisive opportunity to calibrate and frame the measures appropriately. Introducing territorial differentiation, considering typology-based criteria, and aligning incentives with the objectives of contractual stability would strengthen the purpose of the proposal.

As might be expected, stakeholders have welcomed a proposal that grants them a tax reduction. Business associations represent legitimate interests and fulfill their role in defending them. It is hoped that both the Government and the media keep this in mind when analyzing the opinions of these entities and the statements of their representatives.

It now falls to the Assembly of the Republic to ensure that the final design of the incentive effectively serves the public interest.

If the ambition is to promote housing at genuinely moderate prices, rigor in the parameterization of the measures is essential to ensure that fiscal effort produces the intended impact.